Expert analyses on extreme equity valuations have been focused on everything but the major causal factor.
It’s laugh till you cry… till you realize how pathological it is.
The extreme valuation is because we are all chasing yield. Or it’s because the Fed is forcing us into high-risk assets. Or maybe it’s more because big corporates have been buying back stock… and the list goes on.
What has been driving equity value to the extreme is primarily consolidation of the wealth, but the best-and-the-brightest, highest paid professionals, are not allowed to say that. Instead, analyses focus on derivative values, tending to the political values of the masters of destiny who pay ambitious, upwardly mobile sub-elites handsome salaries and bonuses to do their will, bought and paid for, and thus subordinated, on demand, in the free marketplace.
At the extreme, being consolidated, and thus subordinated, how free is the marketplace, really?
The irony is so extreme it is pathological… and tragically comic!
(See articles by griffithlighton on the organized psychopathy.)
Look at, for example, the professed notion we have inflation so low it is not normal.
If the median income is falling, and the extreme, top-income class is rising, then prices naturally tend to deflate. This is being described as low inflation but, ironically, the normal rate of inflation still persists, deflating the median income.
Industry and markets have been rapidly consolidating, and there is a finance charge since it is paid for with borrowed money.
Financing is paid for by reducing the workforce, which is deflationary. Since the object is to force the median income down and the upper income up, inflation occurs in the form of product shaving to resist deflation.
With declining income and product shaving, you are actually working more for less, and paying more for less. The natural result is the extreme values being “accommodated” at abnormal rates.
Borrowing costs for consolidation are really low — deflated — along with the median income, being described as “the new normal.”
At this point, equity value is the laughingstock of risk-value in the political dimension. We laugh at what derives from it, on a regular basis, as a form of entertainment, with highly paid court jesters vested in the equity interest, and not a forum for actually doing something about it.